Exercise 1-4 (LO 1-2)
Requirement 1
Revenues − Expenses = Net Income
Requirement 2
Assets = Liabilities +
Stockholders’
equity
$50,000 = $27,000 + $X
Exercise 1-5 (LO 1-2)
Requirement 1
Revenues − Expenses = Net Loss
Requirement 2
Assets = Liabilities +
Stockholders’
equity
$19,000 = $15,000 + $X
Exercise 1-6 (LO 1-3)
Cowboy Law Firm
Income Statement
Service revenue $9,300
Expenses:
Salaries $2,200
Exercise 1-7 (LO 1-3)
Buffalo Drilling
Statement of Stockholders’ Equity
Common
Stock
Retained
Earnings
Total
Stockholders’
Equity
Beginning balance $11,000 $ 8,200 $19,200
Issuance of common stock 8,000 8,000
Exercise 1-8 (LO 1-3)
Wolfpack Construction
Balance Sheet
Assets Liabilities
Cash $ 6,000 Accounts payable $ 3,000
Stockholders’ Equity
Common stock 11,000
Retained earnings 16,000 *
* Assets = Liabilities + Stockholders’ equity
$50,000 = $23,000 + ($11,000 + Retained earnings)
Exercise 1-9 (LO 1-3)
Requirement 1
Beginning balance $ 5,000
Cash received from sale of products to customers 40,000
Cash received from the bank for long-term loan 45,000
Cash paid to purchase factory equipment (50,000)
Cash paid to merchandise suppliers (12,000)
Requirement 2
Tiger Trade
Statement of Cash Flows
Cash Flows from Operating Activities
Cash inflows:
From sale of products to customers $40,000
Cash outflows:
For merchandise suppliers (12,000)
For workers (24,000)
Cash Flows from Investing Activities
Purchase factory equipment (50,000)
Cash Flows from Financing Activities
Borrow from bank 45,000
Pay dividends (6,000)
Net cash flows from financing activities 39,000
Net increase in cash 32,000
Exercise 1-10 (LO 1-3)
Requirement 1
Fighting Okra Cooking Services
Income Statement
Service revenue $75,000
Expenses:
Salaries $24,000
Supplies 14,500
Requirement 2
Fighting Okra Cooking Services
Statement of Stockholders’ Equity
Common
Stock
Retained
Earnings
Total
Stockholders’
Equity
Beginning balance $200,000 $32,000 $232,000
Issuance of common stock 25,000 25,000
Exercise 1-11 (LO 1-3)
Requirement 1
Artichoke Academy
Statement of Stockholders’ Equity
Common
Stock
Retained
Earnings
Total
Stockholders’
Equity
Beginning balance $150,000 $50,000 $200,000
Issuance of common stock 40,000 40,000
Requirement 2
Artichoke Academy
Balance Sheet
Assets Liabilities
Cash $52,600 Accounts payable $ 9,100
Supplies 13,400 Unearned revenue 2,400
Total liabilities 30,000
Stockholders’ Equity
Total stockholders’ equity 260,000
Total liabilities and
stockholders’ equity $290,000Total assets $290,000
Exercise 1-12 (LO 1-3)
Requirement 1
Squirrel Tree Services
Balance Sheet
Assets Liabilities
Prepaid insurance 3,500 Notes payable 20,000
Building 72,000 Total liabilities 33,200
Stockholders’ Equity
Common stock 40,000
Retained earnings 11,800
Total stockholders’ equity 51,800
Requirement 2
Squirrel Tree Services
Statement of Cash Flows
Cash Flows from Operating Activities
Cash inflows from customers $ 60,000
Cash outflows for salaries (22,000)
Cash Flows from Investing Activities
Sale investments 10,000
Cash Flows from Financing Activities
Borrow from bank 20,000
Pay dividends (6,500)
Net cash flows from financing activities 13,500
Net increase in cash (4,500)
* Plug number in order to calculate correct ending balance
Exercise 1-13 (LO 1-3)
1. Revenues − Expenses = Net Income
2.
Change in
stockholders’
equity
=Issue common
stock +Net
Income − Dividends
$17,000 = $11,000 + $12,000 − $X
3. Assets = Liabilities + Stockholders’
equity
$24,000 = $X + $15,000
4. Total change
in cash =Operating
cash flows +Investing
cash flows +Financing
cash flows
$26,000 = $34,000 + ($17,000) + $X
Exercise 1-14 (LO 1-3)
Year
Net
Income Dividends
Retained
Earnings*
1 $ 1,700 $ 600 $1,100
2 2,200 600 2,700
* Retained earnings = Beginning retained earnings + Net income − Dividends
Exercise 1-15 (LO 1-3)
($ in billions)
Change in
retained
earnings
= Net income − Dividends
1.
Change in
retained
earnings
= Net income − Dividends
$3.2 = $6.9 − $X
2.
Change in
retained
earnings
= Net income − Dividends
$3.4 = $X − $2.6
3.
Change in
retained
earnings
= Net income − Dividends
$1.6 = $1.6 − $X
4.
Change in
retained
earnings
= Net
income
− Dividends
[$X − (−$1.6)] = ($1.0) − $0
5.
Change in
retained
earnings
= Net
income
− Dividends
[$1.56 − $X] = $0.43 − $0.06
Exercise 1-16 (LO 1-3)
($ in billions)
Assets = Liabilities + Stockholders
’ equity
1. Assets = Liabilities + Stockholders’
equity
$228 = $107 + $X
2. Assets = Liabilities + Stockholders’
equity
$X = $1,500 + $110
3. Assets = Liabilities + Stockholders’
equity
$4.7 = $X + $0.3
4. Change in
assets =Change in
liabilities +
Change in
stockholders’
equity
$1.2 = $0.3 + $X
5. Change in
assets =Change in
liabilities +
Change in
stockholders’
equity
$X = ($0.34) + $0.02